Foundation Medicine Set For 'Material Upside,' Cowen Says In Bullish Initiation

Foundation Medicine Inc FMI, a manufacturer of genomic analysis diagnostics for solid and circulating cancer, is  uniquely positioned in comprehensive cancer profiling, a Cowen analyst said. 

The Analyst

Cowen analyst Doug Schenkel initiated coverage of Foundation Medicine with an Overweight and $90 price target.

The Thesis

Foundation Medicine is well-positioned to succeed in the field of genetic testing, Schenkel said in a Thursday note. (See the analyst's track record here.)

Schenkel cited four reaons for his bullish take on Foundation Medicine's fundamentals: 

• A first-mover advantage in the oncology comprehensive genetic testing space, boasting a more integrated offering than most competitors.
• F1 CDx's unique FDA as well as CMS approval provides its an edge over competition.
• A strong genetic database built on the back of robust test volumes.
• A comprehensive genetic database that's gaining value due to its appeal to biopharma companies.

Foundation generated more than 200,000 comprehensive genetic profiles in cancer since 2012, with test volumes growing 60 percent year-over-year in 2017 to 83,000. The aggregate number of profiled samples could hit 500,000 in 2019, the analyst said.

The combination of the FDA/CMS approval for the F1CDx product and Foundation's capacity render it a go-to CDx development partner, Schenkel said.

"The virtuous cycle of more tests, partnerships, and knowledge [and Roche Holding Ltd. (ADR) RHHBY] positions FMI for material upside from here," the analyst said. 

Schenkel named the following upcoming catalysts for Foundation Medicine: 

• A finalized NCD decision and CPT pricing determination.
• Private payer coverage decisions.
• New biopharma partnerships and trial readouts.
• Quarterly earnings.

The Price Action

Foundation Medicine shares have almost doubled over the past year.

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